Foreclosure Flipping is Back

The September 2012 issue of the Foreclosure News Report shines a bright light on the investment strategy of flipping, which is up 25 percent from last year. We take readers to Tampa, Fla., where Realtor Lee Kearneyis theking of flippers and to Highland Park, Calif., where “hipster flips” are the latest craze. We also invited Utah-based quick-flip duo, Doug Clark and Mike Baird, stars of “Flip Men” on Spike Television, to pen a guest column on fast-growing flipping trend.

During the real estate boom, flippers used mortgages to finance deals. Now, a new breed of all-cash foreclosure flippers is dominating the topsy-turvy foreclosure flipping market.

Across the nation, a new foreclosure flipping trend is brewing, something big. It took hold about a year ago, and is now exploding nationwide.

In Tampa, Fla., Lee Kearneyis theking of flippers.

“We provide liquidity to the market,” boasts Kearney, a serial flipper who flipped his first foreclosure in 2003. “There’s a value to what we do. I flipped seven or eight properties in 2005. I did 50 flips in 2007. I doubled that in 2008. We wholesaled 500 properties last year. We’re the largest wholesale flipper of single-family homes in the Tampa-St. Petersburg area. We wholesale about 40 to 50 properties a month.”

Kearney, a Realtorat West Florida Wholesale Properties, buys distressed properties at auction, through short sales and bank-ownedREO properties and then quick-turns them for double-digit profits. He repairs them and then sells them wholesale to investors or retail to first-time homebuyers. He buys most of his foreclosure in the north Tampa community of Wesley Chapel, as well as in Riverview, Apollo Beach and Ruskin in south Tampa, where developers overbuilt during the real estate boom.

“We average a 10 to 20 percent margin,” said Kearney. Here’s a typical Kearney flip: He bought a run-down foreclosure on 1707 Woodbine Drive in Brandon, Fla. for $65,000. He rehabbed it for $30,000, and sold it for $130,000, grossing $35,000.

“But the markets changed,” said Kearney, referring to Wall Street money entering the Tampa foreclosure market. Now large hedge funds are coming in and burning off the distressed inventory. But the hedge funds don’t want low-end, Section 8, D-grade properties that I’m buying. We don’t have competition from the funds.”